Can Vendors Buy Influence? The Relationship Between Campaign Contributions and Government Contracts

Abstract

Over the past 30 years, research on government contracting has identified three major influences that help explain variation in contracting decisions—managerial, organizational, and political. This study looks to advance the political influence literature by introducing a factor that has received limited attention—vendor influence. This study specifically focuses on contract transactions at the U.S. federal government to determine if vendors influence the contract award. Traditionally, political influence is studied at the macro or meso levels. This study shifts the unit of analysis to the micro level which requires a change in measurement of political influence. The study uses vendor campaign contributions to capture political influence on this new level of focus.

Keywords:

• campaign contributions
• contracting
• political influence
• vendor influence

Notes

¹All data about government contracting comes from the USASPENDING.GOV website.

²While I acknowledge that a model that contains data for all bidders offers a more accurate account of influence, I was limited by data availability. Data were not available for all those that submitted bids for a particular government request. Therefore, this design was selected to eliminate the need to control for competing bids.

³I cluster based on the industry NAICS product code. According to the U.S. Census, “the North American Industry Classification System (NAICS) is the standard used by Federal statistical agencies in classifying business establishments for the purpose of collecting, analyzing, and publishing statistical data related to the U.S. business economy.” For more information see http://www.census.gov/eos/www/naics/ This is a similar technique utilized by Witko (2011).

⁴I use data from the Center for Responsive Politics. Rather than utilizing PAC data to represent a corporations’ interest, the Center associates all employee data with a specific place of employment. Their full statement of this methodology is as follows: “CRP is the only organization that invests in categorizing campaign contributions by industry in a way that includes individuals’ contributions, not just money from political action committees. Here’s the logic behind our methodology: Since corporations and other organizations are prohibited from making political contributions from their treasuries, one must look at the contributions from people associated with the institution to gauge its political persuasion and how it might be trying to exert influence in Washington. Also, the Federal Election Commission requires disclosure of a donor’s employer and occupation if they contribute more than $200, which suggests the government is concerned about individuals’ economic, or industrial, interests. We know that not every contribution is made with the donor’s economic or professional interests in mind, nor do we assert that every donor considers their employer’s interests when they make a contribution. But our research over more than 20 years shows enough of a correlation between individuals’ contributions and their employers’ political interests that we feel comfortable with our methodology. We have also observed that the donors who give more than $200, and especially those who contribute at the maximum levels, are more commonly top executives in their companies, not lower-level employees.”

⁵For an extensive discussion of contracting and privatization in the military, see Rundquist and Carsey (2002), Markusen (2003), and Singer (2003). Each provides an in-depth analysis of defense contracting and privatizing demonstrating the distinct nature.

⁶Interpretation is based on the log transformed dependent variable; therefore, I use a percentage change in the DV rather than a unit change.